Switching Costs And The Foreign Firm'S Entry
In this paper we consider a two-period model of market entry with homogeneous products and switching costs. It is shown that the pro-competitive effect of a foreign firm's entry (i.e. unilateral trade liberalization) emerges before the entry. Also, conditions that are conducive to a competitive environment in the second period are shown to yield a less competitive outcome in the first period. That is, when the marginal cost of the foreign entrant is relatively low, the first-period output of a domestic monopolist is relatively low as well. Copyright � 2009 The Author. Journal compilation � 2009 Blackwell Publishing Ltd and The University of Manchester.
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Volume (Year): 77 (2009)
Issue (Month): 3 (06)
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